MBUS 300 exam 2 practice questions
n answers graded A+ 2025/2026
Which measure is useful in evaluating the efficiency in managing inventories?
(a)Inventory turnover.
(b)Days in inventory.
(c)Both (a) and (b).
(d)None of the above. - ANS ✔✔(c)Both (a) and (b).
Compute the current ratio for 2017 (using the data to the right).
(a) 1.26
(b) 3.0
(c) 0.80
(d) 3.75
current ratio= current assets/current liabilities
current assets= 81,000 current liabilities= 27,000 - ANS ✔✔(b) 3.0
Calculate EPS (to the nearest cent) given the following information:
Net Income $300,000
Beginning common shares outstanding 400,000
Ending common shares outstanding 420,000
,net income / [(beginning shares + ending shares) /2] - ANS ✔✔.73
Calculate the inventory turnover given the following information:
Beginning inventory $38,000
Cost of goods sold 84,000
Ending inventory 46,000
cost of goods sold / average inventory(current year + previous year / 2) - ANS ✔✔2.0
Ratio Analysis: - ANS ✔✔involves comparisons for a single company across time.
involves comparing certain financial numbers to other financial statement numbers.
involves comparisons among similar companies.
Leverage - ANS ✔✔refers to using borrowed funds to generate returns for stockholders.
is desirable because it creates returns for shareholders without using any of their money.
increases risk by committing the company to future cash obligations.
Leverage Ratio: - ANS ✔✔Debt to Equity
Debt to Equity = Average Total Liabilities
Ratio Average Shareholders' Equity
Solvency - ANS ✔✔refers to a company's ability to meet its debts as they come due.
, There is pressure on companies with high levels of leverage to manage their solvency.
Current Ratio
*must know formula - ANS ✔✔Current = Current Assets
Ratio / Current Liabilities
This ratio measures solvency in the sense that current assets can be used to meet current
liabilities. - ANS ✔✔Current Ratio
Quick Ratio - ANS ✔✔Quick = Cash + Short-Term Investments + Net A/R
Ratio Current Liabilities
this ratio provides a more stringent test of a company's solvency by removing items not
immediately convertible to cash. - ANS ✔✔Quick ratio
Interest Coverage Ratio - ANS ✔✔Interest = Net Income + Tax Expense + Interest Expense
Coverage Interest Expense
This ratio compares the annual funds available to meet interest to the annual interest expense. -
ANS ✔✔Interest Coverage Ratio
Accounts Payable Turnover Ratio - ANS ✔✔Accounts = Cost of Goods Sold
Payable Average Accounts Payable
Turnover
n answers graded A+ 2025/2026
Which measure is useful in evaluating the efficiency in managing inventories?
(a)Inventory turnover.
(b)Days in inventory.
(c)Both (a) and (b).
(d)None of the above. - ANS ✔✔(c)Both (a) and (b).
Compute the current ratio for 2017 (using the data to the right).
(a) 1.26
(b) 3.0
(c) 0.80
(d) 3.75
current ratio= current assets/current liabilities
current assets= 81,000 current liabilities= 27,000 - ANS ✔✔(b) 3.0
Calculate EPS (to the nearest cent) given the following information:
Net Income $300,000
Beginning common shares outstanding 400,000
Ending common shares outstanding 420,000
,net income / [(beginning shares + ending shares) /2] - ANS ✔✔.73
Calculate the inventory turnover given the following information:
Beginning inventory $38,000
Cost of goods sold 84,000
Ending inventory 46,000
cost of goods sold / average inventory(current year + previous year / 2) - ANS ✔✔2.0
Ratio Analysis: - ANS ✔✔involves comparisons for a single company across time.
involves comparing certain financial numbers to other financial statement numbers.
involves comparisons among similar companies.
Leverage - ANS ✔✔refers to using borrowed funds to generate returns for stockholders.
is desirable because it creates returns for shareholders without using any of their money.
increases risk by committing the company to future cash obligations.
Leverage Ratio: - ANS ✔✔Debt to Equity
Debt to Equity = Average Total Liabilities
Ratio Average Shareholders' Equity
Solvency - ANS ✔✔refers to a company's ability to meet its debts as they come due.
, There is pressure on companies with high levels of leverage to manage their solvency.
Current Ratio
*must know formula - ANS ✔✔Current = Current Assets
Ratio / Current Liabilities
This ratio measures solvency in the sense that current assets can be used to meet current
liabilities. - ANS ✔✔Current Ratio
Quick Ratio - ANS ✔✔Quick = Cash + Short-Term Investments + Net A/R
Ratio Current Liabilities
this ratio provides a more stringent test of a company's solvency by removing items not
immediately convertible to cash. - ANS ✔✔Quick ratio
Interest Coverage Ratio - ANS ✔✔Interest = Net Income + Tax Expense + Interest Expense
Coverage Interest Expense
This ratio compares the annual funds available to meet interest to the annual interest expense. -
ANS ✔✔Interest Coverage Ratio
Accounts Payable Turnover Ratio - ANS ✔✔Accounts = Cost of Goods Sold
Payable Average Accounts Payable
Turnover
